THE DFID CHIEF CALLS FOR RAISING DOMESTIC REVENUE, INVESTMENT IN POWER SECTOR

Star Business Report

Bangladesh must continue all the good work it is doing at the moment to raise economic growth to a level that propels the nation to a middle-income status, said a leading development campaigner.

“It includes investment in basic services, macroeconomic stability and budget management. You have to keep doing the right things,” said Mark Lowcock, head of UK’s Department for International Development or DFID.

Lowcock came to Dhaka to monitor DFID’s contribution to the country’s economic growth and poverty reduction.

The UK government is Bangladesh’s largest bilateral donor with an aid programme directly helping millions of the poorest people in the country. The UK is providing $300 million in grants to Bangladesh this year.

Lowcock is managing a global development programme of $16 billion this year and the size of the aid has made the UK into one of the largest development assistance providers in the world.

During an interview in Dhaka with The Daily Star, he admired the progress Bangladesh has made in accelerating economic growth consistently for 15 years.

Bangladesh has lifted a large number of people from extreme poverty and provided better healthcare, education and access to sanitation.

“I am particularly impressed to see the benefits of development and economic progress across the society.”

“The bottom 40 percent of the population in Bangladesh has more than 20 percent of the national income. It is a much higher number than in many other countries.”

“Developing the economy by international standards is an impressive story.”

Equally, DFID is aware that the country faces a number of challenges.

“Everybody who comes here is struck by the potential of Bangladesh and wants to understand how that can be unleashed. Some of the countries that have 6 percent economic growth on average can easily grow to 10 or 11 percent,” Lowcock said.

Lowcock, who began his career in DFID (formally Overseas Development Administration) in 1985, said Bangladesh would have to work on the power sector, economic governance and business environment to achieve higher economic growth.

“The UK is interested in helping Bangladesh unlock faster growth.”

Boosting domestic revenue and raising it to the level fitting Bangladesh’s development pace comes as a significant challenge, he said.

“It is true that the macroeconomy is stable but low domestic resource mobilisation is still a challenge.”

Bangladesh is a country with one of the lowest tax-GDP ratios, which means that it is hard to generate enough domestic resources to finance its own development. “Implementing the new VAT law would be very important to raise the tax base.”

Lowcock, who was appointed as the permanent secretary in June 2011, said attracting foreign direct investment is important as it allows the country to invest and grow at a faster rate.

“Investment resources are scarce globally. Every country, including the UK, has to compete to attract foreign investment. The things that matter to investors are the business environment, macroeconomic stability, ease of doing business and contract enforcement.”

“No investor wants to come to a place where they would be worried about whether they would be able to make some return on their investment and take home the profit.”

Political uncertainty, strikes and violence also keep investors at bay, he added.

On the ongoing stand-off between the ruling party and its rival alliance, Lowcock said politics is central to the development process.

Lowcock, who graduated in economics and history from Oxford University, said in order to attract more foreign investment in the power sector, the tariff regime has to be structured so they can recoup their investment.

He said corruption has to be dealt with and there has to be a credible judicial system, streamlined rules and regulations, proper bureaucracy, and a transparent bidding system.

“All of these things give confidence to the investors that if they come here and risk their money, they will be treated fairly. Rule of law has to prevail.”

“And there is a reason for that. There is a lot more investment flowing into some neighbouring and African countries. You will have to deal with deterrents to woo foreign investment.”

DFID will focus on improving health and education, other poverty related outcomes, help build the country’s resilience to climate change and create more jobs for the youth, he added.

Business people talk about the lack of high-level skills, which is a constraint in Bangladesh, he said. “If you are able to make some progress on that area it will help you unlock your potential.”

The country has a young population and many people enter the labour market every year, he said. “That creates an enormous opportunity for demographic dividend. But it is only a dividend if you can find productive ways for these young people to engage in the labour force.”

“Again, it comes back to dealing with constraints to growth and building skills in the labour force. Those are the things we are going to work on.”

Bangladesh’s biggest asset is its population, who are hard working entrepreneurial people, he added.

“Investing in human capital is your opportunity. You have already had success in the area as many educated people have gone abroad, and some of them are working in industries at home.”

To improve the quality of education, Bangladesh will have to work on the curriculum and ensure that teachers are accountable and examination systems work, he said.

“At higher levels, you will have to provide more detailed technical knowledge so they have the ability to apply that knowledge and think critically, to be effective in the workplace of a modern economy.”